The MeasureOne Private Student Loan Report 2013

Transcription

1 The MeasureOne Private Student Loan Report 203 December 9, 203 Authors: Dana Arvidson Managing Director, Capital Markets Dan Feshbach Chief ExecuJve Officer Rushali Parikh Managing Director Products and OperaJons Jeff Weinstein Chief Economist, Managing Director of Research and Development Contact:

2 Thank You MeasureOne thanks the seven lenders for their willingness to parjcipate in this study and their ongoing efforts to increase transparency into the trillion- dollar student loan market. All lenders, servicers, securijes issuers, and the federal government are invited and encouraged to join the ongoing effort to expand transparency to beter enable data- driven decision- making.

3 TABLEOFCONTENTS. Introduction 2. TheStudentLoanMarket:OutstandingBalance 3. TheStudentLoanMarket:UndergraduatesUseofPrivateStudentLoans 4. DelinquencyTrendsbyQuarter(asapercentageofLoansinRepayment) 5. TheStudentLoanMarket:PerformancebyQuarter 6. DistributionbyProgram Type(byQuarter) 7. BalancebyProgram Type(byQuarter) 8. DistributionbyLoanStatus(byQuarter) 9. LoanStatusbyQuarter 0.PerformancebyProgram Type(byQuarter).GrossCharge-ofRatesbyQuarter 2.PerformancebyAcademicYearofOrigination(byQuartersSinceOrigination) 3.GrossCharge-ofsbyAcademicYearofOrigination 4.RepaymentTrendsbyAcademicYearofOrigination 5.OriginationVolumeandDistributionbyProgram TypebyAcademicYearofOrigination 6.Cosignedvs.Non-CosignedLoanDistributionbyAcademicYearofOrigination 7.SchoolCertificationbyAcademicYearofOrigination 8.GlossaryofTerms 9.MeasureOneMethodologyforDataColectionandValidation

4 INTRODUCTION Background PrivatestudentloansplayavitalroleinfinancingeducationintheUnitedStates.Privatelendersarefocusedonmeetingthegapinfinancingbetweenfederalaid,loansandother resourcesavailabletostudentsandtheirfamiliesandthecostofcolege. RecentlyreleasedDepartmentofEducationdatashowsthatonlyasmalpercentageofstudentsaretakingoutprivateeducationloans,andthatthispercentagehassteadilydeclined since Intermsofsize,privateloansrepresentonlyasmalfractionoftheoveralstudentloanmarket,withfederalloanscomprisingthebulkofloansoriginatedtoday. InJuly202,theDepartmentofEducationandtheConsumerFinancialProtectionBureaureleasedastudy(the 077Report )oftheprivateeducationloanmarketbased,inpart,on 2 datasubmitedbyninemajorprivateeducationlenders. Thedatashowspositivetrendsincreditperformanceoftheprivateeducationloanmarket.However,thetimeperiod coveredinthe077reportendedondecember20.the PrivateStudentLoanPerformanceReport-203 providesanupdatetoandextendsthecfpbstudywithorigination andportfolioperformancetrends. ExecutiveSummary MeasureOnehasledadatacooperativeofthenation ssevenlargestactiveprivatestudentlenders,agroupthataccountsforasignificantpercentageofalprivatestudentloans outstandingandrepresentsanevenhigherpercentageoftheoriginationsofprivatestudentloansinthemarkettoday.thegroupincludes:discoverbank;thefirstmarblehead Corporation;PNCBank,N.A.;RBSCitizens,N.A.;SalieMae;SunTrustBanks,Inc.;andWelsFargoBank,N.A.Theperformancereviewshowsthatprivatestudentloans,which involvecredit-basedunderwriting,adocumentedabilitytorepay,andahighpercentageofcosigners,perform significantlybeterthanfederalloansandcontinuetoshowpositive trendsintermsofrepayment,delinquenciesandchargeofs. AmongtheReport sconclusions: Thesizeoftheprivatestudentloanmarketissmalerthanhasbeenpreviouslyreported.Thetotaloutstandingdebtreportedbythesevenlargestactivelendersisapproximately $63bilion,whichislessthan6percentofthetotalstudentdebtoutstanding. Overthepastfiveyears,federalloansoutstandinghaveincreasedfrom nearly$600bilionin2008tomorethan$trilioninoutstandingdebttoday.duringthesameperiod, outstandingprivateloanbalanceshavegrownatamuchslowerpaceandhavebasicalyleveledofsince20. Thedatashowsthatprivatestudentloansforthesevenlendersinthestudycontinuetoshowpositiveperformancetrends.Forexample,privatestudentloanswithserious delinquencies(90+dayspastdue)peakedattheheightoftherecessionin andhavesteadilydeclinedby49percentevenasthepercentageofloansinrepaymenthas almostdoubled. Asofthe3rdQuarterof202,only3.89percentofprivatestudentloanswereseriouslydelinquent,measuredasapercentofloansinrepayment,andhavefurtherdeclinedto3 percentinthe3rdquarterof203.althoughnotanexactcomparison,thefederalreservebankofnewyorkestimatedthat,asofthe3rdquarterof202,2percentofal studentloans,includingprivatestudentloans,wereseriouslydelinquent,alsomeasuredasapercentofloansinrepayment.giventhesizeoffederalstudentloansoutstanding, relativetoprivatestudentloans,itisclearthatfederalstudentloanprogramsstatisticalyaccountfortheoveralstudentloandelinquencyratesreportedbythefederalreserve 3 BankofNewYork. Duringthelastfouracademicyears,morethan90percentofundergraduateand75percentofgraduateprivatestudentloansincludedacosigner. Schoolcertificationhasbeenuniversalyadoptedforprivateloanstoundergraduateandgraduatestudents.Thisisanimportantprotectionagainstover-borowing. Theseimprovementsincreditperformancearetheresultofamultitudeoffactors,includingchangesinloanproductsandterms,continuouslyrigorousand/orimprovedunderwriting, asignificantpercentageofcosigners,universaladoptionofschoolcertification,andadocumentedabilitytorepay. U.S.DepartmentofEducation,NationalCenterforEducationStatistics,NationalPostsecondaryStudentAidStudy(NPSAS:08,NPSAS:2) 2 ConsumerFinancialProtectionBureauandDepartmentofEducation, PrivateStudentLoans, August29,202 3 Pleaserefertopage5oftheReport

5 THESTUDENTLOAN MARKET:OUTSTANDING BALANCE Privatestudentlendingisasmalbutimportantcomponentofthestudentloanmarket OutstandingBalancebyLoanType OutstandingBalance(%ofTotal)byLoanType OutstandingBalance($Bilions) OutstandingBalance(% oftotal) FederalLoans PrivateStudentLoans(SevenParticipatingLenders) OtherSecuritizedPrivateLoans FederalLoans 577 PrivateStudentLoans(SevenParticipatingLenders) 44 OtherSecuritizedPrivateLoans 7 OutstandingBalance($Bilions) , Total ,026,9 OutstandingBalance(% oftotal) % 6.93% 2.66% % 9.42% 9.73% 92.39% 92.99% 6.75% 6.58% 6.38% 5.98% 5.66% 2.24% %.63%.35% TheoutstandingbalancedoesnotincludeJPMorganChaseBankandUSBank,whichcontributeddatainthe077Report,andotherslendersnototherwiseincludedherein. Source FederalLoans: PrivateStudentLoans:Datafrom thesevenlendersparticipatinginthisstudy; OtherSecuritizedPrivateLoans:MeasureOnestandardizedstudentloansecuritiesdatabuiltusingpubliclyavailableremitancereports,thatincludesdatafrom AccessGroup,FirstMarblehead,KeyCorpandothernon-profit issuers.itdoesnotincludedatafrom thesevenparticipatinglenders,otherthanthenon44asecuritizedportfoliosoffirstmarblehead.firstmarbleheadnolongerhaslegalcontrolofthosetrustsanddatafrom suchtrustswere notincludedinthelendercontributeddata. Ascolegetuitionhascontinuedtoriseatafasterpacethaninflationandpersonalincomelevels,thedemandforloanstohelppaytuitionhasgrownconsiderably.Whileprivate studentloanoutstandingbalanceshaveleveledofinrecentyears,federalstudentloanoutstandingbalanceshaveclimbeddramaticaly.asaresult,studentloanbalances surpassedcreditcardbalances,andatover$trilion,trailonlymortgagesintermsofbalancesoutstanding.asthedatainthetableaboveshows,whileoutstandingstudentloan balanceshaveclimbedfrom justover$600bilionin2008toover$.trilionin203,privatestudentloanbalanceshaveremainedrelativelystable(federalstudentloansarethe growthdriver). 2

6 THESTUDENTLOAN MARKET:UNDERGRADUATESUSEOFPRIVATESTUDENTLOANS Recentlyreleasedfederaldatashowsthatasmalproportionofundergraduatesareusingprivatestudentloans %ofundergraduatesusingfederalvs.privatestudentloans Al Federal Private 4 39% 42% 4 % UndergraduatesUsingStudentLoans % 33% 35% 4% 5% 6% 2003/2004AY 2007/2008AY 20/202AY 2003/2004AY 2007/2008AY 20/202AY 2003/2004AY 2007/2008AY 20/202AY AcademicYear 2003/2004AY 2007/2008AY 20/202AY SourceU.S.DepartmentofEducation,NationalCenterforEducationStatistics,NationalPostsecondaryStudentAidStudy(NPSAS:04,NPSAS:08,NPSAS:2) RecentlyreleaseddatabytheDepartmentofEducationshowsthatthepercentageofstudentsandfamilieswhoobtainedprivateloanshasdeclinedfrom 4% in2007/2008 academicyearto6% in20/202academicyear.meanwhile,theshareofstudentstakingoutfederalloansactualyincreasedfrom 35% to4 duringthesameperiod. Thereareanumberoffactorscontributingtothesetrends: ) Stafordloanlimitsincreasedin2008and2009; 2) Colegetuitionshavecontinuedtorise; 3) Somelenderssignificantlytightenedunderwritingstandardsonprivatestudentloansduringthefinancialcrisis,whileotherlendershavecontinuedtofolowlong-standing rigourousunderwritingpractices;and 4) Throughbeterdisclosurepractices,studentsandfamiliesarebecomingmoreeducatedabouttheavailabilityoffederalstudentloansandarelesslikelytotakeoutonlya privatestudentloan. 3

7 DELINQUENCY TRENDSBY QUARTER (ASA PERCENTAGEOFLOANSREPAYMENT) Privatestudentloanperformancehassteadilyimproved(asmeasuredbydelinquenciesasapercentageofloansinrepayment)sinceitpeakedduringthecreditcrisisin 2009 Quarter 2008 Q42008 Q2009 Q Q42009 Q200 Q Q4200 Q20 Q Q420 Q202 Q Q4202 Q203 Q (% of Repay) 5.07% % 4.8% 5.7% 7.08% 6.04% 4.9% 4.96% 6.27% 5.4% % % 4.24% 4.06% % 3.37% 90+(% of Repayment Repay) (% oftotal) 3.8% 3.43% 5.38% 6.0% 5.26% 5.2% 5.36% 5.2% 4.57% 4.23% 4.03% 3.86% 3.77% 3.6% % 3.89% 3.35% % 48.07% 55.85% 54.3% 57.46% 55.06% 6.0% 60.34% % 68.5% 67.28% % % 74.5% % % % 3.04% 73.84% Delinquencies(% ofrepayment) Repayment(% oftotal) 8% 6% 4% 2% Delinquencies(% ofoutstandingbalanceinrepayment) 30-89(% ofrepay) 90+(% ofrepay) Q2009 Q200 Q20 Q202 Q203 Repayment(% oftotaloutstandingbalance) Q2009 Q200 Q20 Q202 Q203 Trendlinesshowthatoutstandingdelinquenciesforthesevenparticipatinglendershavedeclinedevenasthepercentageofloansinrepaymenthasalmostdoubled. Atypicalprivatestudentloanlifecycleconsistsofnumerouscashflowingandnon-cashflowingstatuses: ) Repayment:forpurposesofthisReport,repaymentincludesborowersinschoolwitharepaymentobligation(i.e.,interestonlypayments); 2) Deferment:paymentsarenotrequiredduringtheinitialin-schoolperiod,andduringsubsequentperiodswhenaborowerreturnstoschoolorisactiveinthemilitary; 3) Grace:paymentsarenotrequiredduringashortperiodoftimefolowingwithdrawal/graduationfrom school(typicalyatleast6months);and 4) Forbearance:paymentsaretemporarilynotrequiredforborowersfacingfinancialhardship Wedefinealoanasdelinquent,whenitisinacashflowingstatus,paymentsarerequiredtobemade,andtheborowerislateinmakingthosepayments.Presentingdelinquencyas apercentageofloansinrepaymentprovidesanaccuratepictureofborowersthatarelateontheirpayments. 4

8 THESTUDENTLOAN MARKET:PERFORMANCEBY QUARTER AccordingtotheFederalReserveBankofNew York,90+delinquenciesforstudentloansinrepaymenthaveincreasedto2percent 90+Delinquencies(%ofOutstandingBalanceinRepayment)fortheOveralStudentLoanMarket % 20.68% 20.99% 8.6% 9.04% 90+(% ofrepay) 5% 5% Source Federal:FRBNYConsumerCreditPanel/Equifax TheFederalReserveBankofNewYork/EquifaxDatadefines90+delinquenciesasloansthatare90daysormorepastduepriortocharge-of.Federalloansareconsidered defaultedanywherefrom 270to360dayspastdue,whileprivateloansaretypicalycharged-ofateither20or80dayspastdue.Thelongertimeframeforfederalloanswilcause ahigherpercentageoffederalloanstobe90daysormorepastduecomparedtoprivateloans(alelsebeingequal). TheFederalReserveBankofNewYorkdata,whichislargelycomprisedoffederalstudentloans,showsasteadyriseinoveralstudentloandelinquencies,from 9percentin 2009to2percentin202,measuredasapercentageofloansinrepayment. ThestrongimprovementindelinquenciesexhibitedbyourlendercontributorsduringthistimeperiodismaskedintheFederalReserveBankofNewYorkdatabyadeclinein performanceoffederalstudentloans. 5

9 DISTRIBUTION BY PROGRAM TYPE(BY QUARTER) Over8ofprivatestudentloansbythesevenparticipatinglendershavebeenmadetoUndergraduatestudents 5.37% Graduate 84.63% Undergraduate DistributionbyProgram Type(% oftotaloutstandingbalance) AsofQuarterEnd203 Quarter Undergraduate Graduate OtherProgram Type Total 2008 Q42008 Q2009 Q Q42009 Q200 Q Q4200 Q20 Q Q420 Q202 Q Q4202 Q203 Q ,305,053,504 6,929,040,374 62,503,360,22 6,253,65,055 6,36,256,634 60,026,077,583 60,462,55,09 59,329,005,78 58,970,278,079 55,38,209,654 55,627,405,257 54,532,250,66 54,08,883,65 50,77,479,34 50,749,370,823 49,59,924,85 48,700,25,37 47,22,707,227 47,036,00,48 45,54,080,478 44,26,634,866 5,89,350,75 5,694,92,254 5,739,847,682 5,709,609,57 5,727,766,780 5,706,745,788 5,743,54,339 5,682,802,570 5,652,660,786 5,593,773,42 5,607,898,96 5,484,739,650 5,446,49,444 5,060,787,406 5,05,34,326 5,002,047,589 4,986,597,958 4,905,089,447 4,96,97,929 4,946,543,039 4,97,876,446 8,838,236,696 8,79,079,298 8,782,203,304 8,703,09,93 8,782,28,777 8,68,69,607 8,736,409,537 8,704,425,954 8,728,037,280 7,52,257,75 7,543,723,06 7,50,56,385 7,503,026,95 7,35,499,774 7,326,238,262 7,290,096,674 7,248,587,50 7,40,477,57 7,06,66,783 6,948,858,027 6,827,409,942 48,647,466,093 47,55,768,822 47,98,309,235 46,840,895,572 46,85,27,078 45,637,72,88 45,982,59,25 44,94,777,94 44,589,580,02 42,266,78,76 42,475,783,236 4,545,994,580 4,069,364,806 38,34,92,33 38,37,79,235 37,227,779,922 36,465,029,669 35,67,40,263 35,02,565,706 33,68,679,43 32,47,348,478 Asmalpercentageofotherprivatestudentloansoriginatedbythesevenparticipatinglendersinclude consolidationloansandloansthatwerenotcodedbythesevenlenders,whichhavenotbeenincludedinthe chartabove. 6 Asof9/30/203

10 BALANCEBY PROGRAM TYPE(BY QUARTER) Thebalanceofprivatestudentloansoutstandingfrom thesevenparticipatinglendersgrew duringtheobservationperiodto$63bilionin203.growthslowed noticeablybetween20($59bilionoutstanding)and203($63bilionoutstanding) 70B OutstandingBalancebyProgram Type 60B 50B 40B 30B 20B 0B 0B 2008 Q42008 Q2009 Q Q42009 Q200 Q Q4200 Q20 Q Q420 Q202 Q2202 CurentBalance($) 202 Q4202 Q203 Q Program Type Undergraduate Graduate OtherProgram Type 2 TheoutstandingbalancedoesnotincludeJPMorganChaseBankandUSBank,whichcontributeddatainthe077Report,andotherlendersnototherwiseincludedherein.Inaddition,doesnotincludethenon44A securitizedportfoliosoffirstmarbleheadbecausetheynolongerhavelegalcontrolofthosetrustsanddatafrom suchtrustswerenotincludedinthelendercontributeddata. 2 Otherprogram typeprivateloansincludeconsolidationloansandloansthatwerenotcodedbythesevenparticipatinglenders. 7

11 DISTRIBUTION BY LOAN STATUS(BY QUARTER) Asof203,morethan7oftheoutstandingprivatestudentloansforthesevenparticipatinglendersareinrepaymentstatus 2.0% Forbearance 4.7 Grace 8.6% Deferment 74.68% Repayment DistributionbyLoanStatus(% oftotaloutstandingbalance) AsofQuarterEnd203 Quarter Repayment Deferment Grace Forbearance 2008 Q42008 Q2009 Q Q42009 Q200 Q Q4200 Q20 Q Q420 Q202 Q Q4202 Q203 Q % 2.6% 2.2% 2.27%.93% 2.49% 2.57% 2.62% 2.55% 2.8% 2.7% 2.7% 2.43% % 3.44% 3.3% % 3.8% 5.44% % 2.32% 2.62% 5.5% 4.67% 2.79% 3.37% 6.96% 6.23% 3.68% 4.6% 8.67% 7.64% % 0.06% 8.96% 5.56% % 8.6% 6.9% 20.6% 8.69% 9.64% 7.93% 22.4% 20.34% 20.95% 20.9% 25.58% 24.37% 25.75% 25.27% % 3.37% % 33.88% 35.29% 74.68% 76.65% 74.95% 76.42% 73.27% 74.9% 72.5% 73.67% 69.54% 70.77% 68.03% 68.76% 63.5% 63.89% 60.69% 6.27% 55.25% 57.64% % CurentBalance(% oftotaloutstandingbalance) Theincreaseinthepercentageofoutstandingstudentloansinrepaymentstatusispartialyatributabletoincreasedseasoningonloansoriginatedin2008/2009academicyearand prioryearsandhigherutilizationbyborowersofin-schoolrepaymentoptions. Asof9/30/203 8

12 LOAN STATUSBY QUARTER Thepercentofprivatestudentloansinrepaymentstatushasincreasedsignificantlyto74.7%oftotaloutstandingbalanceasof203from 48.2%asof CurentBalancebyLoanStatus(% oftotaloutstandingbalance) 8 Balance(% oftotal) Q42008 Q2009 Q Q42009 Q200 Q Q4200 Q20 Q Q420 Q202 Q Q4202 Q203 Q LoanStatus Repayment Deferment Grace Forbearance Therearemanyfactorsdrivingthetrendsinrepayment,deferment,graceandforbearance,including: )Agrowingpercentageofborowerschoosingtotakeloansthatrequirepaymentswhileinschool(i.e.,interestonlypayments); 2)Loansoriginatedduringthepeakoriginationyearsoftheprivatestudentloanmarketinthemid-2000 sarefulyinrepayment. Theuseofforbearanceasadefaultmitigationtooldeclinedduringtheobservationperiod: a) Thedatafrom thesevenparticipatinglendersshowasteadydeclineintheuseofforbearancedroppingto2.0% asof203; b) Despitethedeclineintheuseofforbearance,thenumberofpeoplewhoaredemonstratingthattheycanrepayhasincreased. 9

13 PERFORMANCEBY PROGRAM TYPE(BY QUARTER) Performancebyprogram typeshowsimprovementsindelinquencyratesonthepartofbothundergraduateandgraduateprograms 30-89DaysDelinquent(% ofoutstandingbalanceinrepayment) 90+DaysDelinquent(% ofoutstandingbalanceinrepayment) 5% Program Type Undergraduate Graduate 5% Program Type Undergraduate Graduate 30-89(% ofrepay) 90+(% ofrepay) 5% 5% Q2009 Q200 Q20 Q202 Q203 Q2009 Q200 Q20 Q202 Q Undergraduate 6.25% Q % Q % Q % % Q DaysDelinquent(asa% ofbalanceinrepayment) Q Q % Q % Graduate 2.44% 3.65% 4.04% 2.78% 3.54% 4.27% 4.% 3.3% 3.36% 4.08% % % 2.99% 2.97% % % Q % Q % % Q % Q % Q % % Q % Q % Q % Undergraduate 4.2 Q % Q % Q % % Q % 90+DaysDelinquent(asa% ofbalanceinrepayment) Q % Q % Q % Graduate.04%.29% 2.5% 2.74% 2.58% 2.88% 3.0% % 2.7% % 2.9% 2.24% 2.07% 2.07% 2.37% 2.%.84%.62%.87% Q Q % % Q % Q % Q % % Q Q % Q % % ThetrendindecliningdelinquenciesasapercentageofloansinrepaymentforthesevenparticipatinglendersisconsistentacrossUndergraduateandGraduateprograms. Graduateloanshavetraditionalyshownlowerdelinquencyrates,andinrecentyears,Undergraduateloanshavenarowedthegapindelinquencyratesatboth30-89daysand 90+daysdelinquent. 0

14 GROSSCHARGE-OFFRATESBY QUARTER Grosscharge-ofratespeakedin2009andhavesteadilydeclinedeversince AnnualizedCharge-ofs(% ofrepay) 9% 8% 7% 6% 5% 4% 3% Quarter 2008 Q42008 Q2009 Q Q42009 Q200 Q Q4200 Q20 Q Q420 Q202 Q Q4202 Q203 Q2203 Annualized Charge-ofs (% ofrepay) 3.65% 3.88% 4.96% 7.72% 9.92% 6.45% 6.05% 6.49% 6.5% 5.64% 4.95% 4.64% 4.56% 4.42% 3.53% 3.67% 3.8% 4.75% 3.44% 3.9% % Q2009 Q200 Q20 Q202 Q203 Periodicgrosscharge-ofratesforthesevenparticipatinglendershavegeneralydeclinedsincethepeakin2009andareattheirlowestlevelssincetherecentcreditcrisis. Grosscharge-ofsaredefinedasthetotaldolaramountoftheloanatthetimeofcharge-ofduringthequarterdividedbythequarterendbalanceinrepayment.Toobtainannualized charge-ofsasapercentofrepayment,wemultiplythequarterlycharge-ofrateby4.

15 PERFORMANCEBY ACADEMIC YEAR OFORIGINATION (BY QUARTERSSINCEORIGINATION) Measuringperformancebyacademicyearoforiginationhighlightsthesignificantimprovementinprivatestudentloanperformanceforthesevenparticipatinglendersin thelastfouryears 30-89DaysDelinquent(% ofoutstandingbalanceinrepayment) ByQuartersSinceOrigination 90+DaysDelinquent(% ofoutstandingbalanceinrepayment) ByQuartersSinceOrigination 5% 5% 30-89(% ofrepay) 4% 3% 2% 90+(% ofrepay) 4% 3% 2% % % AcademicYear 2008/2009AY 2009/200AY 200/20AY 20/202AY 202/203AY OneapproachMeasureOnehastakeninthisreportinmeasuringdelinquencies,istogrouploansintolikevintages(loansoriginatedduringthesameacademicyeararegrouped together).performanceofeachvintageisevaluatedrelativetotheperformanceofloansofasimilarageoriginatedduringdiferentacademicyears. Thetrendinimprovedperformanceismoreevidentwhenevaluatedbyacademicyearoforigination.Additionaly,thetrendinoveralperformanceimprovementislikelytoaccelerate asmorerecentacademicyearsshowsignificantlyimprovedperformance.usingdelinquenciesof30-89daysasapercentageofloansinrepaymentasourmetric: academicyearisperforming3% beterthan20-202academicyear isperforming4% beterthan isperforming2 beterthan isperforming35% beterthan Usingdelinquenciesof90+daysasapercentageofloansinrepaymentasourmetric: academicyearisperforming47% beterthan20-202academicyear isperforming2 beterthan isperforming26% beterthan isperforming56% beterthan

16 GROSSCHARGE-OFFSBY ACADEMIC YEAR OFORIGINATION Measuringcharge-ofsbyacademicyearoforiginationalsohighlightsthesignificantimprovementinprivatestudentloanperformanceforthesevenparticipatinglenders overthepastfouracademicyears AnnualizedCharge-ofs(% ofoutstandingbalanceinrepayment) ByQuarterSinceOrigination 5% AnnualizedCharge-ofs(% ofrepay) 4% 3% 2% % AcademicYear 2008/2009AY 2009/200AY 200/20AY 20/202AY 202/203AY MeasureOnealsomeasuredcharge-ofsasapercentofloansinrepaymentbyacademicyearoforigination.Theimprovementincharge-oftrendsismoreevidentwhenevaluated byacademicyearoforigination. Therateofcharge-ofhassignificantlyimprovedineachacademicyearsincethefirstacademicyearincludedinthestudy: academicyearisperforming3 beterthan20-202academicyear isperforming22% beterthan isperforming36% beterthan isperforming4% beterthan

17 REPAYMENTTRENDSBY ACADEMIC YEAR OFORIGINATION Thepercentageofprivatestudentloansinrepaymentwhileinschoolhasincreasedsignificantlyinrecentacademicyears 8 Repayment(% oftotaloutstandingbalance) ByQuartersSinceOrigination 7 6 Repayment(% oftotal) AcademicYear 2008/2009AY 2009/200AY 200/20AY 20/202AY 202/203AY Agrowingpercentageofborowersarechoosingtomakeregularlyscheduledpaymentswhileinschoolatthesametimethattheprivateloanmarkethasstartedtoprovideborowers withfinancialincentivesformakingsuchpartialpaymentswhilein-school.thispracticehelpstoestablishgoodpaymentpracticesandkeepsborowingcostsdown.meanwhile, lendersandschoolsareeducatingborowersandtheirfamiliesontheincreasedcostsofdeferingloanpaymentsuntilaftergraduation. Thesetrendsareevidentinthedata,as ofloansoriginatedduringacademicyear2008/2009wereinrepaymentwhileinschool,comparedto47% in200/20academicyear, and38% in202/203academicyear. 4

18 ORIGINATION VOLUMEAND DISTRIBUTION BY PROGRAM TYPEBY ACADEMIC YEAR OFORIGINATION Thevolumeofnewlyoriginatedprivatestudentloansdeclinedfrom 2008/2009academicyearto202/203academicyear,butgrew ata5.6%annualgrowthrate between2009/200academicyearand202/203academicyear OriginationVolumebyAcademicYear OriginalBalance ($Bilions) /2009AY 2009/200AY 200/20AY 20/202AY 202/203AY % oftotaloriginations 0 5 OriginationVolumebyProgram Type (%oftotaloriginations) 2008/2009AY 2009/200AY 200/20AY 20/202AY 202/203AY AcademicYear Undergraduate Graduate 2008/2009AY 89.2% 0.88% 2009/200AY 200/20AY 20/202AY 202/203AY 87.85% 88.06% 87.47% 86.22% 2.5%.94% 2.53% 3.78% Undergraduate Graduate Otherprivatestudentloansoriginatedbythesevenparticipatinglendersincludeconsolidationloansand loansthatwerenotcodedbythesevenlenders,whichhavenotbeenincludedinthetableandchartby Program Typeabove Datafrom thesevenparticipatinglendersindicatethatannualoriginationsremainbelowtheamountin2008andhavegrownmodestlyinrecentyears.thistrendcoincideswith thelenders heightenedand/orcontinuedemphasisonprudentunderwritingandborowers capacitytorepay. BorowingbystudentsatendingUndergraduateprograms,at86% oforiginationvolumeinthe202/203academicyear,consistentlyrepresentsthelargestsegmentof borowersbyprogram type. 5

19 COSIGNED VS.NON-COSIGNED LOAN DISTRIBUTION BY ACADEMIC YEAR OFORIGINATION Cosignerratesremainhigh OriginationVolumebyCosignedvs.Non-Cosigned (%oftotaloriginations) Undergraduate Graduate % oftotaloriginations % oftotaloriginations /2009AY 2009/200AY 200/20AY 20/202AY 202/203AY Cosigned Non-Cosigned Undergraduate Graduate OtherProgram Type Total AcademicYear Cosigned Non-Cosigned Cosigned Non-Cosigned Cosigned Non-Cosigned Cosigned Non-Cosigned 2008/2009AY 77.49% 22.5% 57.97% 42.03% 74.63% 25.37% 75.33% 24.67% 2009/200AY 90.52% 9.48% 60.07% 39.93% 84.27% 5.73% 86.59% 3.4% 200/20AY 90.86% 9.4% 60.07% 39.93% 78.26% 2.74% 86.5% 3.85% 20/202AY 92.3% 7.87% 65.85% 34.5% 7.03% 28.97% 87.9% 2.8% 202/203AY 9.27% 8.73% 6.87% 38.3% 79.36% 20.64% 86.65% 3.35% Otherprogram typeprivateloansincludeconsolidationloansandloansthatwerenotcodedbythesevenparticipatinglenders. Sincepayingforcolegeismostoftenafamilyresponsibility,co-signersplayavitalroleinensuringthatstudentshaveaccesstofinancingandtypicalyatlowerinterestrates. Cosignersenablelenderstoextendcredittheyotherwisewouldnotextend,basedonadocumentedabilitytorepay,andsupportrepaymentoftheloanobligation. Beginningwiththe2009/200academicyear,andineachoftheacademicyearssincethen,morethan9outofevery0loansbythesevenparticipatinglenderstostudents atendingundergraduateprogramsincludedacosigner. 6

20 SCHOOLCERTIFICATION BY ACADEMIC YEAR OFORIGINATION UniversaladoptionofschoolcertificationtoUndergraduateandGraduatestudents OriginationVolumebySchoolCertification (%oftotaloriginations) 0 SchoolCertified % oftotaloriginations 5 NotSchoolCertified Other 2008/2009AY 2009/200AY 200/20AY 20/202AY 202/203AY AcademicYear SchoolCertified NotSchool Certified Other 2008/2009AY %.79% 2009/200AY 9.47% 5.7% 3.36% 200/20AY 9.09% 3.35% 5.57% 20/202AY 92.6% 2.27% 5.57% 202/203AY 95.75% 0.76% 3.48% Otherprivateloansincludeconsolidationloansandloansthatwerenotcodedbythesevenparticipatinglenders. Thesevenparticipatinglendersuniversalyrequireschoolcertificationaspartoftheircoreprivateloanprogramstoundergraduateandgraduatestudents(consolidation/refinancing loans,barexam loansandresidencyloansareexamplesofloanswhereschoolcertificationisnotapplicable).certificationactsasanimportantprotectionagainstoverborowing. Inthisprocess,theschoolcertifiestheamountofthestudent sneedandreceivesloanproceedsdirectlyfrom thelender.thisgivesschoolfinancialaidstaftheopportunityto counselfamiliesontheirloanoptions,includingtheavailabilityoffederalstudentaid,andtoensurethattheyunderstandtheirrepaymentobligations. 7

21 GLOSSARY OFTERMS 30-89(% ofrepay):balanceofloansthatare30to89dayspastdueonpaymentsasofquarterend,dividedbybalanceofloansinrepayment(loanstatus)asofquarterend 90+(% ofrepay):balanceofloansthatare90ormoredayspastdueonpaymentsasofquarterend,dividedbybalanceofloansinrepayment(loanstatus)asofquarterend 90+DaysDelinquent:Aloanthatis90ormoredayspastdueonpaymentsandbeforeitisreportedascharged-oftocreditreportingagencies.Alsoreferedtoasa seriously delinquentloan. AcademicYear:AloanisdefinedtobeoriginatedinanAcademicYear,ifitsfirstdisbursementisbetweenJulyofayearthroughJune30ofthefolowingcalendaryear AnnualizedCharge-ofs(% ofrepay):grosscharge-ofsforaquarterdividedbythequarterendbalanceinrepayment(loanstatus),multipliedby4(orannualized). CosignedLoan:ALoanwithacosigner. DelinquentLoan:Aloanthatisinacashflowingstatus,paymentsarerequiredtobemade,andtheborowerislateinmakingthosepayments. DirectLoans:EducationalloansprovidedbytheWiliam D.FordFederalDirectLoanProgram,tostudentsandparentborowersdirectlythroughtheU.S.DepartmentofEducation, ratherthanthroughabankorotherlender. FederalLoans:FFELP,DirectandPerkinsloans. FFELP:TheFederalFamilyEducationLoanProgram,aprogram thatwasdiscontinuedinjuly200. GraduateLoans:LoansmadetoborowersenroledatleasthalftimeinGraduateprograms. GrossCharge-ofs:Thetotaldolaramountoftheloanatthetimeofcharge-ofduringthequarter. LoanStatus:Atypicalprivatestudentloanlifecycleconsistsofnumerouscashflowingandnon-cashflowingstatuses:. Repayment:forpurposesofthisReport,repaymentincludesborowersinschoolwitharepaymentobligation(i.e.,interestonlypayments); 2. Deferment:paymentsarenotrequiredduringtheinitialin-schoolperiod,andduringsubsequentperiodswhenaborowerreturnstoschoolorisactiveinthemilitary; 3. Grace:paymentsarenotrequiredduringashortperiodoftimefolowingwithdrawal/graduationfrom school(typicalyatleast6months);and 4. Forbearance:paymentsaretemporarilynotrequiredforborowersfacingfinancialhardship OriginalBalance:Totalamountdisbursedontheloan. OtherProgram Type:Consolidationloansorloanswithanuncodedprogram type. Program Type:Program ofstudyforwhichtheloanwasobtained. Quarter:ReportingQuarter.Balancesaredefinedasofquarterendwhilecharge-ofsarethosethatoccuredduringtheentirequarter.ThisreportcoversReportingQuartersstarting from 2008to203. Repayment(% oftotal):balanceofloansinrepayment(loanstatus)asofquarterend,dividedbytotaloutstandingbalanceofalloansasofquarterend SchoolCertifiedLoan:Aloanforwhichtheschoolatendedbythestudentcertifiestheamountofthestudent sneedandreceivesloanproceedsdirectlyfrom thelender. UndergraduateLoans:LoansmadetoborowersenroledatleasthalftimeinUndergraduateprograms.Thesecouldbe>2yearor<=2yearUndergraduateprograms. 8

22 MEASUREONEMETHODOLOGY FOR DATA COLLECTION AND VALIDATION ) MeasureOneemployedarigorousdatadefinition,colectionandvalidationprocesstoensurethatthedataandrelatedmetricsprovidedinthePrivateStudentLoanPerformance Reportareaccurateandconsistentacrossparticipatinglenders. 2) Uponinitiationoftheproject,MeasureOneandthesevenparticipantsformedadatacommiteecomposedofbothdataexpertsandbusinessleadersfrom theparticipants.this commiteebothensuredtechnicalaccuracyofthedataandprovidedkeydecisionmakersanopportunitytovalidatetheresultsforreasonableness. 3) MeasureOnewentthoughadetailed,multi-stepdatacolectionprocess: a. MeasureOneandparticipantsdiscussedandagreedondatafieldstobeprovided,includingagreementonappropriatedefinitions b. MeasureOneprovidedamockdatafilelayouttoparticipants c. Participantsagreedtheformulastobeusedtocalculateeachfieldandmetric d. ParticipantssuppliedthebaseinputnumbersthatMeasureOnerequiredinordertocalculateeachmetric 4) EachparticipantvalidatedMeasureOne scalculationsofeachmetric,includingtheinputsintoeachcalculation. 5) Oncethedataexpertsfrom eachparticipantvalidatedtheirdataset,measureonesenttheinformationtoparticipant sbusinessleaders,whoreviewedthenumbersforrelativeto otherinternaldatasources. 6) Aftereachparticipant sdatasetwasvalidated,measureoneaggregatedtheparticipant sdataintoacombineddataset,andthedataexpertsandbusinessleadersfrom the participantsreviewedthecombineddataset. 7) WhentheparticipantscompletedtheirreviewoftheCombinedDataSet,MeasureOnerequiredeachparticipanttosignandcertifytheaccuracyofthedataviaadocumentcaled themeasureonedatavalidationandcertification.participantsrepresentedinwritingthat: a. TheparticipantcarefulyreviewedtheirspecificDataSetandtheCombinedDataSet,andexplicitlyconfirmedthateachdatasetwasmaterialyaccurate b. TheparticipantexplicitlyapprovedincorporationoftheirdatasetintotheMeasureOneCombinedDataSetforfinalinclusionintheReportandReport sdatasupplement. 9